Thursday, April 14, 2011

I fear the "best news about Obama's budget plan" was a mirage

Yesterday, I celebrated this gloss on Obama's budget plan from Paul Krugman:
I don’t want to step too much on the administration’s selling point, but progressives upset by the claim that there are three dollars of spending cuts for every dollar of tax increases should be aware that there’s a bit of creative labeling going on. As I understand it, they’re counting both interest savings and reductions in “tax expenditures” — subsidies through the tax code — as spending cuts. It’s a much more balanced plan if you look at the balance between revenue increases and non-interest outlays.
On the basis of the administration's plan outline, this looks plain wrong to me. The plan itemizes $2.01 trillion in projected spending cuts over 12 years -- $770 billion in  discretionary spending, $400 billion in security, $480 billion  in healthcare on top of projected ACA savings, and $360 billion in other mandatory spending. It projects $1 trillion in saved interest payments, and another $1 trillion in new tax revenue.  That last figure would seem to include some conflation of sunsetting the Bush tax rates and reforming the tax code along Bowles-Simpson lines, albeit with some undefined skew toward reducing the tax reductions of the wealthy in particular. I see no indication that the administration is counting $1 trillion for the Bush sunset and another trillion in tax reform -- which would make no sense, the the envision reform would lower marginal rates, presumably (if Bowles-Simpson is a guide) to below current rates. 5 x 1 does not equal 4.

Update: Howard Gleckman notes the ambiguity and overlapping categories of of possible revenue sources  in more detail here.

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